Inflation Expectations Surpass 2.76%, Heightening Rate Hike Pressure

Inflation concerns are deepening amid surging international oil prices stemming from the Middle East conflict. This is leading to increased pressure on the Bank of Korea to raise its benchmark interest rate, emerging as a key variable expected to amplify market volatility in the second half of the year. South Korea's 10-year inflation expectations have been recorded at 2.76%, surpassing the Bank of Korea's benchmark rate of 2.50%. The 10-year inflation expectations, which were 2.45% in late February before the Middle East conflict, have shown an upward trend. In a consumer survey conducted by the Bank of Korea from the 6th to the 9th, the expected inflation rate for the next year was 2.9%, a 0.2 percentage point increase from the previous month.

As the possibility of a benchmark rate hike grows, fears of monetary tightening have spread across the market. The National Pension Service participated in this trend by net purchasing 1 trillion won worth of government bonds.

The stock market opened slightly down today, influenced by the surge in oil prices, but turned upward as buying interest centered on semiconductors flowed in. The KOSPI index closed at 6690.90, up 49.88 points (0.75%) from the previous trading day, while the KOSDAQ index finished at 1220.26, up 4.68 points (0.39%). In the Seoul foreign exchange market, the won-dollar exchange rate recorded 1479.0 won, up 5.4 won. On the KOSPI market, institutions and individuals were net buyers with 478.2 billion won and 167.0 billion won, respectively, while foreigners were net sellers of 613.8 billion won. Among sectors, chemicals (+3.8%) and transportation equipment & parts (+1.0%) showed strength. The KOSDAQ market saw construction and transportation/warehousing sectors lead the gains, supported by individual buying.

Analysis suggests that weakening AI-related investment sentiment has led to increased pressure for profit-taking. Major semiconductor stocks, including the Philadelphia Semiconductor Index (-3.6%), Micron (-3.9%), and Sandisk (-6.3%), also closed lower. This situation negatively impacted investor sentiment towards domestic semiconductor stocks. Samsung Electronics, however, showed strong performance, driven by foreign net buying, and led the index's rise.

With WTI futures prices hovering around $100 per barrel, there were expectations of increased oil supply following the UAE's announcement to withdraw from OPEC. However, geopolitical uncertainties have once again come into focus.